24-Hour Trading is a Bad Idea

I'm on record regarding my misgivings about the Robinhood app, which in addition to 'gamifying' investing, has for some time has offered investors extended-hours trading. Now Charles Schwab has made the same decision, allowing its clients the ability to trade securities pretty much any time. 

Sounds like a great idea, right? Why be limited by the hours the exchanges are open? Buy and sell whenever you want! 

But the problem is two-fold. First, off-hours trades have pricing issues because most trading volume takes place during exchange hours, and highly active real-time supply/demand ensures accurate to-the-second pricing data. At moments when not enough shares are changing hands, an investor cannot have confidence that the price they pay at 9pm or 2am is in fact a fair price. 

Secondly, no one makes their best decisions during the night. You're tired from a full day. Maybe you had a big dinner, or an edible or a couple of drinks. Your circadian rhythm slows your thinking, and slows your metabolism. Executive brain function, critical thinking, logic, mental math, are all operating on a skeleton crew. Which makes it not really a great moment to place a bet with hundreds or thousands of your hard-won dollars. 

If you primarily use one of these securities trading platforms, and you're the sort who scrolls stock news or 'fintech' while half-watching Netflix after work, I would sincerely urge you to set yourself limits. You get an idea? Sleep on it. You see a story or a post which scares you? Sleep on it. Markets move fast but not that fast. The losses you save by not making a compromised decision in the late evening will speak for themselves. Remember what Charlie Munger said: "It's not brilliance. It's just avoiding stupidity."  

Morningstar's Samantha Lamas's column, below. Happy Valentine's Day all!

Why Schwab’s 24-Hour Trading Might Be a Bad Idea for Investors

Robin